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RBI’s draft norms on project financing will not impact credit cost: Canara Bank
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
The RBI’s draft regulations aim to tighten rules that govern lending to projects under implementation. It has proposed an increase in provisions for lenders from the current 0.4% to 5% of the total loan amount for both existing and new loans.
Satyanarayana Raju, Managing Director and CEO of Canara Bank, on Thursday (May 9) said the Reserve Bank of India’s (RBI) proposed regulations on project financing will not significantly affect the net interest margin (NIM) or credit costs of the lender.
“We have passed on RBI’s burden to customers,” Raju told CNBC-TV18.
Despite FY24 being labelled as the toughest financial year for the bank, he remained optimistic about Canara Bank’s ability to navigate challenges effectively.
Expressing the need for clarifications from the RBI, Raju stated, “There are several clarifications we need from RBI,” hinting at ongoing discussions between the regulatory authorities and financial institutions to address concerns and ensure a smooth transition.
Addressing concerns about project finance, Raju conveyed confidence in the bank’s ability to sustain its support for project financing initiatives.
“We don’t see an impact on project finance or projects coming up for financing,” he assured.
Regarding other financial indicators, Raju provided insights into Canara Bank’s corporate book, stating that it stands at ₹3.6 lakh crore, with a significant portion dedicated to state government lending and project finance.
Despite acknowledging the burden imposed by RBI’s regulations, Raju asserted that the bank is resilient and remains committed to its customers.
Further, the bank’s MD discussed lender’s performance metrics, including the bank’s NIM and the gold loan book, which currently stands at ₹1.51 lakh crore.
He noted a shift in the bank’s strategy regarding interest subvention on gold loans, expecting a slowdown in gold loan growth. However, he expressed openness to exploring opportunities in the gold financing sector, especially in light of potential restrictions faced by non-banking financial companies (NBFCs).
Looking ahead, Raju projected optimism regarding Canara Bank’s credit growth, highlighting incremental growth in advances in April 2024. He said, “Don’t expect loan growth below 12% for FY25.”
In the financial results for the March 2024 quarter, Canara Bank reported a net profit of ₹3,757 crore, marking an 18% year-on-year increase.
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